Many, many Puyallup homeowners made an attempt to sell their home this year. A record number in fact. And while we faired better than most places in the country, not that many actually got to sell their home. At best this year, less than 1 in 5 homes sold. October and November have been the toughest months with less than 1 in 14 homes selling. December may prove to be worse.
A pretty clear trend started to develop in October - homeowners started pulling their homes off the market. It surely wasn’t because they were selling that we saw inventory levels start to drop. Most sellers decided to pull their home off the market, take the holiday season off, and hope for better days in 2008. Even with less competition, sellers have been struggling all the more.
If history repeats itself though, buyers should return en masse in February to kick off the buying season once again. I don’t pretend to know exactly what we’ll see in the coming year - anyone that would try to convince you otherwise is sadly mislead, arrogant, or has an agenda in my opinion - but my guess is that we’re likely to see high inventory levels and stagnant sales numbers again.
So how do you become the “1″ in five or the “1″ in fourteen even? What do you have to do to compete with the ever-increasing number of owners that are trying to make a move as well? The concepts in this post aren’t new. At some point we all need to come to grips that this isn’t the 2005 market, and we have to get back to basics. To address this issue, let’s look first at your competition and what they’re likely to do, and then how you can put your home in position to be the “1″ to get an offer.
New Home Builders
Most developers and new home builders are paying monthly on the land that they’ve purchased with intent to build on. The longer they sit without a home and a buyer to purchase it from them, the more money they lose. They’re also not buying additional plats to develop and build on. Their goal is to get out of projects as quickly as they can and hope to not lose too much money - any profit at all would be a blessing.
Since they have more than one home to sell, they can afford to provide wide and deep incentives to a few buyers to gather interest in the community, and hope to make it up in future sales. Some incentives we’ve seen this year from builders are front and rear landscaping, fully-fenced, all appliances, all window screens, all window blinds, all closing costs paid, above average buyer’s agent commissions, and - while I personally consider them unethical - agent bonuses.
So how do you compete with New Home Builders:
- New homes mean new landscaping by professionals - no work needed after purchase. Pull the weeds, keep the lawn mowed, lay down new bark or river rock, and plant some color. It’s inexpensive and adds so much appeal.
- Most builders have deep pockets and are willing to help a buyer out financially. While you can’t help them with a down payment, you can help them with their closing costs. You’ll win big if you can create a win for the buyer as well.
- Given the option, most people will buy new. So, the best you can do - and you need to do - is be like-new. Deep clean the house and appliances. New homes are professionally decorated so you need to declutter, depersonalize, and arrange the furniture in such a way that buyers can see the size of the room, at the same time envisioning how they might arrange their own furniture.
- Because of the costs of land and standing inventory, builder pricing is very competitive. You must meet or beat your new home competition in price to have a chance. Who’s going to buy used for more when they can buy new for less?
Bank Owned Properties
More and more, banks are becoming owners of properties. These properties used to be owned by well-intentioned people that, for various reasons, were unable to pay their mortgage for a number of months. After foreclosing on the owner, the bank then tries to sell it by way of county auction. If it goes unsold, the bank then owns the property.
Not only do banks not make good owners - homes are vacant and uncared for - they don’t make good sellers. Homes are often sold as is, without repair. Banks are often inflexible with terms and conditions as well. Offers are often subject to a board of decision-makers and can take some time to approve or counter your offer. Because there’s no emotional attachment in the home though, pricing can be more realistic to what the market will bear. Buyers are willing to invest a bit of sweat equity for a real or perceived “good deal”.
So how do you compete with Bank Owned Properties:
- If your home needs them, make repairs before listing. If you can’t afford the repairs up-front, be flexible when a buyer asks for repairs after their inspection.
- Vacant properties are easy to show - you don’t have to make an appointment and there are no pets to deal with. If you will be living in your home during the marketing and sale process, make it as easy as possible to show your home by keeping it clean all the time and sending pets to family or friends. Then your home can be shown at a moment’s notice without worry or headache.
- I’ll risk reprisal by repeating myself - you must meet or beat your bank owned property competition in price to have a chance. A turn-key home at a good price can attract a buyer away from a sweat-equity home for the same price.
Your Neighbors
Reasons abound when it comes to the motivation your neighbors are selling their home - move up to a larger home, move down to a smaller home, moving out of area for family or career, financial pressures such as foreclosure or loss of job, or just want a change of scenery. Your motivation is likely to be that of one or more of your neighbors.
The more pressure to sell, the more your neighbors are going to do one a few things - present it even more beautiful, be more flexible on terms and showings, offer more incentives to buyers and agents, or price more aggressively. Lack of motivation is their biggest enemy, and your biggest opportunity.
So how do you compete with Your Neighbors:
- Present your home beautifully, both for photos and for buyers. You don’t send your kids off for school pictures, let alone to their grandparents, looking like they just rolled out of bed after they rolled in the hay the day before.
- Be flexible on terms like, when a buyer can see your home, what financing your buyer can offer with, when you can close, and when the buyer can take possession.
- Meet or beat your neighbor competition in price. Buyer incentives like bonuses and even items like TVs and cars stopped working in late summer. And agent bonuses are useless without an interested buyer and doing nothing but take more money out of your pocket.
I won’t beat around the bush here - the single most effective way to be the “1″ in fourteen to get an offer in the first quarter of 2008, above new home builders, banks and your neighbors, is to be competitive in your asking price. If your agent has done a superior job of showcasing and marketing your home on the MLS and on the internet, and if you are the best deal in your neighborhood, you are likely to find yourself entertaining buyers in your home, and under contract with a buyer (or two) in short order.
Doing these all of the things listed will remove the barriers to getting under contract with a buyer. Every item you choose to discredit or ignore is like a speed bump on the freeway. Not only will it all but stop a buyer in their tracks, they’ll think twice about driving your way again.
A Note on Commissions
If your buyer is working with a real estate agent - Realtor or not - they have a duty by law to work in the best interest of their client and not their own. Because I take this fiduciary duty seriously, I feel that it’s unethical to use this pulpit to tell you that you need to meet or beat any of your competition on their buyer’s agent commission offer, and especially to offer agent incentives or bonuses. I would be advocating for the very behavior that I find distasteful. Tempting sin is as ugly as participating in the sin.
But you do need to be aware of what your competition is offering. Just because it’s against the law, doesn’t mean there aren’t a multitude of buyer’s agents that don’t show their clients homes if the commission doesn’t “meet their satisfaction”. Now a buyer and a buyer’s agent can agree up-front what the agent will be paid for their services, and can be allowed to negotiate for their full fee with the seller, or they can get the balance from the buyer - but it doesn’t always work that way. So you need to consider carefully your decision on buyer’s agent commissions.
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